Max Healthcare Institute Ltd Q1 FY2026 Concall Summary

Key Takeaways

• Strong headline growth, integration drag visible: Network revenue grew 27% YoY and operating EBITDA 23% YoY, but new acquisitions pulled down blended ARPOB and margin, while pre-staffing costs for brownfield beds created a temporary direct-cost headwind.
• Existing-unit health is the real story: Like-for-like ARPOB grew 5% YoY (7% in base hospitals) and Existing Unit EBITDA margin reached 26.2%, up 44 bps YoY, even after absorbing a Rs. 12 crore one-time donation.
• Bed-fill then payor-mix is the deliberate strategy: New and acquired hospitals are being filled first with institutional business, which depresses blended ARPOB and margin now but sets up a sequential improvement as the mix is distilled toward higher-value patients.
• The pipeline is fully loaded: ~1,000 brownfield and 500 greenfield beds are expected this year, with Nanavati Phase 1 commissioning in weeks and Max Smart Saket by end-Q2, while Dehradun, Nagpur, Mohali, Vaishali, Thane and Pitampura projects all advanced.
• What to watch next quarter: Whether the promised Q1-to-Q2 margin expansion materialises as direct-cost pressure eases, the pace of payor-mix improvement at recently filled beds, and the initial ramp at Nanavati's new block.

Existing-Unit Strength vs. Blended Optics

• Base hospitals are running hot: Occupancy at base-level hospitals (excluding Lucknow, Nagpur, Dwarka, Jaypee) sits at ~80%, and these units delivered 7% ARPOB growth, confirming that the mature portfolio is both full and improving its case and payor mix.
• New-unit dilution is mechanical, not alarming: Lucknow, Nagpur, Dwarka and the recently acquired Jaypee (Noida) carry lower ARPOB and higher institutional share, which pulls the network average down to a flat Rs. 78,000. Management states no hospital saw ARPOB degrowth.
• International revenue is a high-value bright spot: International patient revenue hit Rs. 208 crores, up 32% YoY, despite airspace restrictions and geopolitical volatility, with growth coming from newer geographies including developed countries. This business carries higher absolute margin even if its percentage margin is lower.
• Digital and outreach channels scaling fast: Digital revenue reached Rs. 744 crores (~29% of total), Max@Home grew 22% YoY to Rs. 60 crores with over 50% repeat transactions, and Max Lab grew 19% YoY to Rs. 48 crores across 1,300+ collection centres.

Abhay Soi: "This marks the 19th consecutive quarter of year-on-year growth, underscoring the success of our strategy and strong execution capabilities of the team."

Margin: The Temporary Direct-Cost Overhang

• What drove the cost spike: Direct costs rose to ~Rs. 1,015 crores because of annual salary increments effective April 1 and pre-staffing for brownfield capacities that are not yet revenue-generating. This is a timing mismatch, not a structural cost problem.
• The Q1-to-Q2 expansion thesis: Management confirmed the hypothesis that direct cost as a percentage should moderate and margin should expand sequentially from Q1 to Q2, as revenues from newly commissioned beds begin to cover the pre-staffing cost.
• One-time donation distorts the base: A Rs. 12 crore donation by DDF society hit indirect overheads in Q1. Excluding it, Existing Unit EBITDA margin would have been 26.7%, not the reported 26.2%. The donation will not recur.
• Management wants investors to use different metrics: EBITDA margin alone is misleading because high-complexity surgeries and international business generate more absolute EBITDA per bed but lower percentage margins. The company asks investors to track EBITDA per bed and ROCE as the correct value-creation cadence.

Yogesh Sareen: "Because you know that our strategy is to fill up the beds and then distil the payor mix. So, this ratio should improve."

Bed Pipeline: The Next 24 Months Are Fully Loaded

• Near-term commissioning: Nanavati Phase 1 (268 beds, including oncology services and nuclear medicine in the basement) starts commissioning over the next few weeks, with the remaining beds and OTs by October-November 2025. Max Smart Saket phased commissioning begins toward end-Q2 FY26. Sector 56 Gurgaon (500 beds) is expected by end-FY26.
• Brownfield expansions progressing: Max Lucknow will add 107 beds (32 ready now, LINAC installation from early September) to reach 520 beds by year-end. Dwarka is already at capacity run-out and planning its own brownfield expansion after 24% QoQ revenue growth and a Rs. 7-8 crore EBITDA uplift.
• Greenfield projects advancing through approvals: Max Nagpur (civil contract awarded, 24-month timeline), Zirakpur Mohali (24 months), Max Vaishali (30 months), and Thane (submissions by end of this quarter) are all moving. Pitampura Delhi has site clean-up complete, awaiting approvals. Max Vikrant Saket waits on Forest Department clearance for tree transplantation.
• Dehradun gets a second hospital: A new 130-bed built-to-suit facility, ~100 metres from the existing 220-bed hospital, will focus on advanced oncology including radiation therapy, with commissioning expected by end-2028.
• Noida integration is in the heavy-lift phase: Acquired in October-November 2024, the Jaypee (Noida) hospital required reapplication of all licenses after the name change, and equipment replacement is constrained by 6-month overseas supply-chain lead times. Management expects a snowballing effect and significant upside in coming quarters.

Abhay Soi: "For example, when we open 400 beds, we are not opening 400 beds on day one. As and when you get the floors, you open it up but we have more than adequate clinicians already onboarded to be able to support the operations."

Payor Mix and ARPOB: A Deliberate Sequence

• Institutional business is the bed-fill tool: Institutional business was started in Mumbai, Nagpur and Lucknow where it did not previously exist. It takes six months to empanel, and the strategy is to use it to fill new beds before commissioning, then gradually shift toward higher-value private payors.
• ARPOB dilution is a choice, not a problem: New and acquired hospitals carry lower ARPOB, which pulls the blended average down. Management is explicit that it will acquire hospitals even at half its current ARPOB if the ROCE maths works at 20-25%, accepting that blended ARPOB may never return to present levels.
• The distillation sequence is already visible: Existing hospitals show 7% ARPOB growth, proving that once beds fill, the mix improvement kicks in. The institutional share and direct cost percentage are both expected to come down as this sequence plays out across newer units.
• Oncology share is a structural tailwind: With bunkers coming through at Dwarka and Lucknow in Q3, oncology's revenue share should rise. Management sees no reason for oncology growth to abate, though it declined to put a specific target on the eventual share.

Abhay Soi: "If we get an opportunity to buy a chain of hospitals, which operates at less than half of the overall ARPOB we are operating at, and we are able to buy it at 25% ROCE, should we or shouldn't we acquire it? We should, right? What it would do is bring down our overall ARPOB and then we may never be able to climb up to the same present levels of ARPOB, so be it."

Capital Allocation and Balance Sheet

• Net debt will rise modestly: Management expects to add around Rs. 400-500 crores of net debt by end-FY26 to fund the project pipeline, but net debt-to-EBITDA will remain below 1.0x.
• Non-core divestiture tidies the portfolio: A binding term sheet has been signed to divest the Chitta and Anoopshahr hospitals for Rs. 40 crores, with completion expected by September 2025. Chitta was operational with Rs. 5 crores in revenue and a Rs. 1 crore EBITDA loss in Q1, and the assets have limited strategic alignment.
• Acquisition philosophy is ROCE-driven: Management will pursue acquisitions that can deliver 20-25% ROCE even if they dilute blended ARPOB, signalling that capital allocation decisions are governed by absolute returns, not by protecting headline averages.

Abhay Soi: "Please consider EBITDA per bed as the right cadence and not EBITDA margin. On one end, because of better occupancy, higher utilization, etc. your margins will increase. On the other end, because you are going for a superior payor mix and a superior clinical mix, your margins should decrease. But your EBITDA per bed and ROCE will increase."

Guidance & Commitments

Key Metrics